Southwest Airlines’ (NYSE:LUV) transformation efforts to boost revenue and profitability by charging for bags and improve efficiency achieved better-than-expected results in the third quarter as the Dallas-based airline earned a profit of $0.11 per share versus expectations for a loss of $0.03.
“We continue to make substantial progress as we execute the most significant transformation in Southwest Airlines’ history. We quickly implemented many new product attributes and enhancements, and the results are showing,” Southwest CEO Bob Jordan said.
With both unit revenues and unit costs performing better-than-expected, Southwest (NYSE:LUV) is reaffirming its full year EBIT guidance, and expects “meaningful” margin expansion in the Q4.
For the current quarter, the carrier expects EBIT to be between $600M to $800M and approximately $1.8B in FY25 and ~$4.3B in FY26.
Operationally, Southwest (NYSE:LUV) projects available seat mile (ASM) to be up ~6%, revenue per available seat mile ((RASM) to increase by 1% to 3%, and cost per available seat mile excluding fuel ((CASM-x)) to increase 1.5% to 2.5%.
For the reported quarter, CASM-x year-over-year increase of 2.5% to $0.122 was attributed to tighter cost controls. Additionally, RASM and PRASM were both basically flat from last year at $0.153 and $0.139, respectively, while the carrier’s load factor was down 140 basis points to 79.8%.
Southwest (LUV) also transported 2.6% fewer passengers in the quarter, with 1% fewer revenue passenger miles.
Following the result, shares of Southwest Airlines gained more than 3%, giving a modest boost to peers United Airlines (UAL), American Airlines (AAL), and Delta Air Lines (DAL), and JetBlue Airways (JBLU).